Energy Costs

30th June 2017

The tumbling cost of offshore wind power could mean that it turns out to be 25 per cent cheaper than energy from Hinkley Point nuclear plant when subsidies are awarded to new projects this year, the industry regulator has suggested. Developers behind a series of proposed offshore wind farms are vying to secure government contracts that will guarantee a price for the electricity they generate for 15 years. Dermot Nolan, chief executive of Ofgem, said he hoped the winning projects would emerge at a price of “£70 or less” per megawatt-hour (MWh). That would compare with £92.50/MWh that was last year awarded to Hinkley Point for a 35-year contract, fuelling debate about the merits of the project and future nuclear plants. The difference between the guaranteed price and wholesale price, currently £43/MWh, will be subsidised by consumers through energy bills, with payouts for Hinkley forecast to hit £30 billion. Just a few years ago offshore wind was one of the most expensive technologies in the market. In 2014 the government awarded some projects a price of £150/MWh. Technological advances, including bigger, more efficient turbines, economies of scale in manufacturing and the introduction of a competitive “reverse auction” process to award subsidies to the cheapest projects have helped to bring costs down rapidly.

Clients have included Greenpeace, Nuclear Free Local Authorities, WWF Scotland and the UK Government’s Committee on Radioactive Waste Management.

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